Key facts
- Former FHFA Director Sandra Thompson believes unified credit scoring models may misprice mortgage risk.
- Thompson stated that a 740 FICO score may not equate to the same risk as a 740 VantageScore.
- FHFA has approved VantageScore 4.0 and signaled acceptance of FICO 10T for loans sold to Fannie Mae and Freddie Mac.
- FHFA moved to a single LLPA grid based on Classic FICO, replacing separate grids.
- Thompson expressed concern about the analysis supporting the unified grid and its impact on risk pricing.
- FHFA is also signaling a move towards bi-merge credit reports from tri-merge.
Former Federal Housing Finance Agency (FHFA) Director Sandra Thompson voiced concerns on Tuesday that the agency's strategy of unifying credit scoring models could lead to mispricing mortgage risk. During a webinar, Thompson questioned whether different scoring models, like FICO and VantageScore, accurately reflect the same risk when assigned the same numerical score, potentially affecting loan pricing for borrowers and the financial exposure of Fannie Mae and Freddie Mac. The FHFA, under Director Bill Pulte, has moved towards accepting multiple scoring models on a single pricing grid and is signaling a shift to bi-merge credit reports. Former Ginnie Mae President Alanna McCargo echoed concerns that different score models may not be interchangeable, which could distort pricing and lead to higher rates for borrowers.